Val is considering purchasing a new video plasma display panel to use with her notebook computer. One model, theXJ3, costs $4200 new, while another, the Y19, sells for S$3000. Val has determined that the salvage value after twoyears of service is $1700 for the XJ3 and $900 for the Y19. Both panels give similar service, except the Y19 is notsuitable for client presentations. If she buys the Y19, about four times a year she will have to rent one similar to theXJ3, at a total year-end cost of about $350. Using the IRR method, which display panel is the better choice? Use atwo-year study period. She must choose only one of the alternatives. Val's MARR is 10 percent.Theis the better choice because the IRR for the change fromispercent, which isthe MARR.(Round to one decimal place as needed.)

IRR stands for Internal rate of return refers to the rate of interest at which the sum of all cash…

Answered: The is the better choice because the…

The is the better choice because the IRR for the change from is percent, which is the MARR. (Round to one decimal place as needed.)

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 20P: Alexander Industries is considering purchasing an insurance policy for its new office building in...

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Val is considering purchasing a new video plasma display panel to use with her notebook computer. One model, the XJ3, costs $4400 new, while another, the Y19, sells for $3000. Val has determined that the salvage value after two years of service is $1900 for the XJ3 and $900 for the Y19. Both panels give similar service, except the Y19 is not suitable for client presentations. If she buys the Y19, about four times a year she will have to rent one similar to the XJ3, at a total year-end cost of about $250. Using the IRR method, which display panel is the better choice? Use a two- year study period. She must choose only one of the alternatives. Val's MARR is 10 percent. The is the better choice because is the IRR for the change from percent, which is the MARR (Round to one decimal place as needed.)
A refinisher of antiques named Constance has been so successful with her small business that she is planning to expand her shop. She is going to start enlarging her shop by purchasing the following equipment.(a) What would be the net cost to Constance to obtain this equipment? Assume that she can trade the old equipment in for 15% of its original cost. Assume there has been no inflation in equipment prices. (b) Suggest a green engineering approach to constance for disposing of the solvents and lacquers used in her business.
William and Miller Brown run a real estate brokerage firm. They have just moved into a new building and want to add some outdoor digital signage to advertise the firm's services. The sign they are considering has two display areas that can display two different images at the same time and costs $104,800. It is expected to have a useful life of 4 years. In an effort to recoup the cost of the sign, William and Miller will rent one display panel to other tenants in the building for $39,646 a year. Electricity to power the sign is expected to be $870 per year. (a) Your answer is correct. Calculate the annual net operating income generated by the new sign. Annual net operating income 12576 eTextbook and Media Attempts: 1 of 3 used (b) Calculate the accounting rate of return of the new sign. Accounting rate of return %
William and Miller Brown run a real estate brokerage firm. They have just moved into a new building and want to add some outdoor digital signage to advertise the firm's services. The sign they are considering has two display areas that can display two different images at the same time and costs $104,800. It is expected to have a useful life of 4 years. In an effort to recoup the cost of the sign, William and Miller will rent one display panel to other tenants in the building for $39,646 a year. Electricity to power the sign is expected to be $870 per year. (a) Calculate the annual net operating income generated by the new sign. Annual net operating income 2$ eTextbook and Media
Natalie is thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2023, and it will be ready for use on September 1, 2023. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. Instructions (a) Determine the cost of the van. (b) Prepare…
Natalie is thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2023, and it will be ready for use on September 1, 2023. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. Instructions (a) Determine the cost of the van. (b) Prepare…
Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2022, and it will be ready for use on September 1, 2022. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. Instructions (c) What impact will the three methods of…
Gloria is planning on opening a cake shop. She has found a location that rents for $15,550 per year and it will cost her another $13,716 to furnish the shop and purchase all the necessary equipment. She plans on charging $20 for a cake and it will cost her $3 per cake for ingredients and $1.92 per cake for decorations and $1.59 per cake for the beautiful, colorful to-go boxes. What is the dollar breakeven point she will need to earn to cover her costs in the first year? Round to the nearest whole number.
Alexander Industries is considering purchasing an insurance policy for its new office building in St. Louis, Missouri. The policy has an annual cost of $10,000. If Alexander Industries doesn’t purchase the insurance and minor fire damage occurs, a cost of $100,000 is anticipated; the cost if major or total destruction occurs is $200,000. The costs, including the state-of-nature probabilities, are as follows: Using the expected value approach, what decision do you recommend? What lottery would you use to assess utilities? (Note: Because the data are costs, the best payoff is $0.) Assume that you found the following indifference probabilities for the lottery defined in part (b). What decision would you recommend? Do you favor using expected value or expected utility for this decision problem? Why?
Dr. Magneto is evaluating whether to open a private MRI clinic in leased office space in a local strip mall. The clinic will run for two years and then close. Before the clinic opens, the offices require $200,000 of renovations. Dr. Magneto will buy $20,000 of computer equipment and one MRI machine. The MRI machine (GE 3.0T Signa Excite HD) costs $2.4M. Assume that the renovations, computer equipment, and MRI are paid for at the beginning of the first year (t=0) and that all three are classified as 15-year property (with depreciation rates of 5% and 9.5% in the first two years). Assume that the MRI machine will be sold for $500,000 at the end of the second year of business at which time the computer equipment will be worthless. The clinic can perform 72 scans per week for 49 operational weeks per year and will charge $600 per scan. The clinic will need two technicians, two receptionists, and one office manager. Wages, salaries, and other payroll costs (i.e., health insurance premiums)…
Your cousin has created a business specialised in 3-D printing of metal spare parts for repair shops. For the purchase of one machine, she is considering two different models (project A and B). You are to assist her in making the best choice. Assume an investment horizon of 6 years and a required rate of return of 10%. Assume no corporate or business tax on purchase, income or resale. No computation is required for the depreciation of the machine. After talking to technical professionals and the marketing manager, you have gathered the following information: (*) Operating cash flow margin % is equal to operating cash flow divided by sales. Operating cash flows are equal to sales minus all the recurring cash cost associated to production and sales. Operating cash flow margin % is constant over the period. a) Determine the initial cash outlay for both project A and B. b) Compute operating cash flow and cash flow from assets for both projects over the six (6) years c) Compute the Net…
Your cousin has created a business specialised in 3-D printing of metal spare parts for repair shops. For the purchase of one machine, she is considering two different models (project A and B). You are to assist her in making the best choice. Assume an investment horizon of 6 years and a required rate of return of 10%. Assume no corporate or business tax on purchase, income or resale. No computation is required for the depreciation of the machine. After talking to technical professionals and the marketing manager, you have gathered the following information: (*) Operating cash flow margin % is equal to operating cash flow divided by sales. Operating cash flows are equal to sales minus all the recurring cash cost associated to production and sales. Operating cash flow margin % is constant over the period. Please show your workings carefully. a) Compute the Net Present Value of both project A and B b) Compute the Internal Rate of Return of both projects. Explain your result c) Assume…